Stocks in Europe struggled for traction as weak economic data from China fueled concerns about a slower global
recovery from the pandemic.
Travel and retail stocks led declines in the Stoxx Europe 600 Index, with H&M falling the most since July after missing sales estimates, while energy shares gained as oil extended an advance. Contracts on the S&P 500 and Nasdaq 100 edged higher after Monday’s declines in the underlying indexes. The 10-year Treasury yield held a fall to about 1.28% and the dollar was steady.
US inflation was lower than forecast in August but still elevated, leaving the debate about whether price pressures are transitory unresolved. Meanwhile, UK inflation surged more than expected to the strongest pace in more than nine years, prompting investors to anticipate a sharper increase in interest rates in 2022. The pound gained.
Asian stocks dropped after reports showed China’s economy took a knock in August from stringent virus controls and tight curbs on property and as authorities told major lenders to China Evergrande Group not to expect interest payments due next week on bank loans. A debt restructuring could raise the prospect of wider social unrest and
contagion in credit markets.
Bloomberg’s industrial metals subindex steadied after the biggest two-day retreat since June as prices of aluminum, copper and nickel fell.
While US inflation print could be seen as reducing pressure on the Fed to start pulling back on loose monetary policy, investors remain wary of a range of obstacles. These include the impact of the Delta virus variant and rising costs on economic reopening, as well as China’s drive to rein in private industries.
“It is hard to argue at this point that it remains entirely transitory,” Dana D’Auria, Envestnet Inc. co-chief investment officer, said on Bloomberg Television, referring to US inflation. “You couple that with that fact that there are still all these supply shocks that we are still working through. I think the markets are going to have to feel the pain.”
Going into the year-end, investors will also have to digest debate around the US debt ceiling, President Joe Biden’s tax package, infrastructure spending and Fed tapering, she added.
Meanwhile, oil gained after a US industry report showed a drop in inventories of crude and gasoline. Gold held at around $1,800 an ounce.
The Stoxx Europe 600 was little changed as of 9:34 am London time and futures on the S&P 500 rise 0.3%.
While futures on the Nasdaq 100 climb 0.3%, futures on the Dow Jones Industrial Average also rise 0.2% and the MSCI Asia Pacific Index was little changed. The MSCI Emerging Markets Index falls 0.4%
The Bloomberg Dollar Spot Index falls 0.1% and the euro rises 0.1% to $1.1815.
While the Japanese yen climbs 0.2% to 109.45 per dollar, the offshore yuan was little changed at 6.4328 per dollar and the British pound rises 0.2% to $1.3832.
The yield on 10-year Treasuries was little changed at 1.28% and Germany’s 10-year yield was little changed at -0.34%. Britain’s 10-year yield advanced one basis point to as much as 0.75%.
Brent crude rose 0.8% to $74.21 a barrel and spot gold falls 0.3% to $1,799.92 an ounce.